In theory, as investment banking pay collapses, asset management compensation is catching up. As the sell-side sheds jobs, the buy-side’s long-term outlook theoretically means that money managers have a safe seat.
But the buy-side buoyancy is showing signs of waning. Big asset managers like Aberdeen have cut jobs and, in the alternatives sector, hedge funds are folding at ever-faster rates.
Pay is tumbling too. After years of pay increases, overall asset management pay is starting to fall, according to new analysis by Greenwich Associates and Johnson Associates. Overall, average pay will be down 5% and the expectation is that it could fall further.
“As performance lags and asset growth slows, we do not expect firms to alter compensation structures to deliver increases or even maintain current levels,” said Frances Mckenzie, managing director at Johnson Associates.
As ever, though, it’s not a simple picture. It’s largely hedge funds where pay has been tumbling, particularly for senior investment professionals. In equities hedge funds, compensation has fallen from $740k in 2013 to a projected $570k in 2015, for example. Over the same period, pay in investment management has remained stable and you can, on average, earn more working for an equity asset manager than for a comparable hedge fund.
Meanwhile, if pay for traders and portfolio managers across both asset managers and hedge funds is tumbling, compensation for research professionals – although substantially smaller – has remained largely unchanged.
And the same battle to keep junior talent that has pushed up investment banking salaries has emerged on the buy-side. Average pay for junior to intermediate investment professionals is $155k, suggests the research. Compensation is expected to head up anyway, but if you’re a top performer expect total pay to reach $180k going forward, or a 16% increase.